End of year tax strategies

by | Dec 8, 2022 | Financial Advice, Insights To Business

Listen Now

Owning a business usually means looking for end of year tax strategies. While you need to be planning for your taxes all year long, the end of the year is your last chance to get things in order before you have to settle up with the IRS. There are a few ways you can make the sting a little less painful, especially if you know how to handle your expenses. Using multiple ways to organize your income and expenses will pay off in the end.

Defer Income Until Next Year

While you can’t hold checks and cash them after the first of the new year, you can hold off sending out your end-of-the-year invoices. Any money you receive prior to December 31st has to be claimed for this year. If not, you may get hit with a penalty. By sending out your invoices after the 1st, the money won’t technically be income until you receive it next year. You will need to work with your accountant and make sure all of your dates line up with one another.

Utilize the Section 179 Expense Deduction

The Section 179 Expense deduction has to do with larger purchases, like computers or other equipment financing, that may have depreciation value. By using the Section 179 expense deduction, you don’t spread the cost over several years like you would if it were depreciating. With this type of deduction, you will be able to deduct the entire purchase price from this year’s taxes.

Maximize Your Ordinary Operating Expenses

You can also maximize any ordinary operating expenses you may have. Stock up on office supplies and printer paper and ink. If you use a lot of packing materials, buy them in bulk before the 31st. This allows you to stay ahead of the game when buying things you already use and will increase your expenses for this year putting more money back in your pocket.

Hire Your Family on Weekends

Hire your kids and retired members of your family. While you will still have to withhold income tax, you won’t have to worry about other types of taxes. Retired people aren’t taxed the same way other people are. Not only will you be helping yourself financially, you will be teaching your kids a good work ethic and allowing older members of your family to feel useful.

Throw a Company Holiday Party

Celebrate a productive year and show your employees how much you appreciate them. Throwing a huge company holiday party is a great way to close out the year. It’s also a good tax write-off. All of the money you spend on your holiday party is deductible from your taxes!

Put a Little Extra in Your Retirement Fund

The best way to help with your taxes is to help yourself after retirement. Adding a little extra into your retirement fund at the end of the year will give your tax return a healthy boost in your favor. Talk to your accountant to find out what type of account is best for you. In the scheme of things, paying taxes shows you had a good year. Finding ways to make that good year benefit you more financially is key. Take a few minutes and go over all of your income and expenses with your accountant. You may find more end of year tax strategies than you realized.